August 19, 2016

The Madison Square Garden Company Reports Fourth Quarter and Fiscal 2016 Results

NEW YORK, Aug. 19, 2016 (GLOBE NEWSWIRE) -- The Madison Square Garden Company (NYSE:MSG) today reported financial results for the fourth quarter and fiscal year ended June 30, 2016

On September 30, 2015, The Madison Square Garden Company completed its spin-off from MSG Networks Inc.  The fiscal 2016 fourth quarter and nine months ended June 30, 2016 reflect the Company's financial results on a standalone basis, including the Company's actual corporate general and administrative costs.

Reported results for fiscal 2015 and the fiscal 2016 first quarter reflect the combined results of the sports and entertainment businesses, which, prior to the completion of the spin-off, had been consolidated with MSG Networks Inc. Please note that results for these periods reflect the allocation of corporate general and administrative costs based on accounting requirements for the preparation of carve-out financial statements. As a result, results for fiscal 2015 and the fiscal 2016 first quarter do not reflect all of the actual expenses that the Company would have incurred had it been a standalone public company for those periods.

On a reported basis for fiscal 2016, the Company generated revenues of approximately $1.1 billion, operating loss of $58.6 million and adjusted operating cash flow ("AOCF") (1) of $68.3 million.  Excluding the impact of a $41.8 million non-cash write-off recorded during the fiscal 2016 third quarter and $6.9 million in reorganization costs recorded during the fiscal 2016 fourth quarter, fiscal 2016 operating loss would have been $10.0 million and AOCF would have been $117.0 million

On a reported basis for the fiscal 2016 fourth quarter, the Company generated revenues of $217.8 million, operating loss of $46.2 million and AOCF loss of $13.8 million.  Excluding the impact of $6.9 million in reorganization costs recorded during the fiscal 2016 fourth quarter, operating loss would have been $39.3 million and AOCF loss would have been $6.9 million

President and CEO David O'Connor said, "At the time of our spin-off last September, we laid out a plan on how we would grow our new standalone live sports and entertainment company, and are pleased with the significant progress we've made on executing that strategy. We took significant steps to strengthen our position in live experiences through our investment in Boston Calling Events and our announced plans to expand into Las Vegas, where similar to the Forum, we think we can successfully fill a need by building a groundbreaking venue focused on music and entertainment. As we look ahead, we are excited about the company's future and remain confident that we have ample opportunities, both organic and external, to drive attractive long-term growth for our company."

Results from Operations
Segment results for the quarters ended June 30, 2016 and 2015 are as follows:

 RevenuesOperating Income (Loss)AOCF
$ millionsF'Q4
2016
F'Q4
2015
%
Change
F'Q4
2016
F'Q4
2015
%
Change
F'Q4
2016
F'Q4
2015
%
Change
MSG Entertainment                $84.0 $93.2 (10)%$(17.9)$(8.4)(112)%$ (13.2)$(4.6)(188)%
MSG Sports 133.5  161.6 (17)% 12.8  40.4 (68)% 18.4  41.9 (56)%
Other 0.2   0.2 NM  (41.0) (27.6)(49)% (19.0) (6.9)(175 )%
Total Company$217.8 $255.0 (15)%$(46.2)$4.3 NM $(13.8)$30.4 NM 

Note: Does not foot due to rounding

1. See definition of adjusted operating cash flow ("AOCF") included in the discussion of non-GAAP financial measures on page 3 of this earnings release.

MSG Entertainment
For the fiscal 2016 fourth quarter as compared to the prior year period, MSG Entertainment revenues of $84.0 million decreased 10%.  The decrease was primarily due to lower revenues for the production, now called New York Spectacular Starring the Radio City Rockettes, and the absence of a $3.6 million insurance recovery recorded in the prior year quarter related to lost revenues due to Superstorm Sandy for the Christmas Spectacular Starring the Radio City Rockettes.  The decrease in revenues for New York Spectacular Starring the Radio City Rockettes was primarily due to fewer scheduled performances, a result of a shift in the timing of the production's run from the spring to the summer, and, to a lesser extent, lower per-show revenue.  This decrease in revenues was partially offset by higher overall event-related revenues, led by The Garden and the Beacon Theatre, along with higher venue-related sponsorship, signage and suite rental fee revenues.

Fiscal 2016 fourth quarter operating loss of $17.9 million increased by $9.5 million and AOCF loss of $13.2 million increased by $8.6 million.  The increase in operating loss and AOCF loss primarily reflects the decrease in revenue and higher selling, general and administrative expenses, partially offset by lower direct operating expenses.

The decrease in direct operating expenses was primarily due to lower expenses for the production, now called New York Spectacular Starring the Radio City Rockettes, primarily a result of a shift in the timing of the production's run, partially offset by higher overall event-related expenses at the Company's venues.  The increase in selling, general and administrative expenses primarily reflects higher corporate general and administrative costs, professional fees and employee compensation and related benefits. As noted above, selling, general and administrative expenses in the prior year fourth quarter do not include all of the actual expenses that the Company would have incurred had it been a standalone public company for that period.

MSG Sports
For the fiscal 2016 fourth quarter as compared to the prior year period, MSG Sports revenues of $133.5 million decreased 17%.  The decrease in revenues was primarily due to lower playoff-related revenues and, to a lesser extent, event-related revenues associated with other live sporting events. This was partially offset by higher media rights fees from MSG Networks Inc. as a result of new long-term media rights agreements between the New York Knicks and New York Rangers and MSG Networks Inc. and, to a lesser extent, the impact from the new advertising sales representation agreement with MSG Networks Inc., as well as higher professional sports teams' regular season ticket-related revenue.

Fiscal 2016 fourth quarter operating income decreased by $27.6 million to $12.8 million and AOCF decreased by $23.5 million to $18.4 million. The decrease in operating income and AOCF was primarily due to the decrease in revenues and, to a lesser extent, higher selling, general and administrative expenses, partially offset by lower direct operating expenses. 

The decrease in direct operating expenses was due to lower playoff-related expenses and, to a lesser extent, event-related expenses associated with other live sporting events, partially offset by higher team personnel compensation costs, other team operating costs, net provisions for NBA and NHL revenue sharing expense and NBA luxury tax, and other net increases.  The increase in selling, general and administrative expenses was primarily due to higher corporate general and administrative costs, costs associated with the Company's new advertising sales representation agreement with MSG Networks Inc., employee compensation and related benefits and professional fees, partially offset by lower marketing costs.  As noted above, selling, general and administrative expenses in the prior year fourth quarter do not include all of the actual expenses that the Company would have incurred had it been a standalone public company for that period.

About The Madison Square Garden Company
The Madison Square Garden Company (MSG) is a world leader in live sports and entertainment that presents or hosts a broad array of world-class events - including concerts, sporting events, family shows and special events - in an unparalleled mix of celebrated venues that span four of the nation's largest entertainment markets. Those venues are: New York's Madison Square Garden, The Theater at Madison Square Garden, Radio City Music Hall and Beacon Theatre; the Forum in Inglewood, CA; The Chicago Theatre; and the Wang Theatre in Boston.  In addition, MSG has a diverse collection of properties that includes some of the most widely-recognized sports franchises: the New York Knicks (NBA), the New York Rangers (NHL) and the New York Liberty (WNBA), along with two development league teams -- the Westchester Knicks (NBADL) and the Hartford Wolf Pack (AHL).  The Company also features popular original entertainment productions -- the Christmas Spectacular and New York Spectacular - both starring the Radio City Rockettes, and through Boston Calling Events, produces outdoor festivals, including New England's premier Boston Calling Music Festival. More information is available at www.themadisonsquaregardencompany.com

Non-GAAP Financial Measures
We define adjusted operating cash flow ("AOCF"), which is a non-GAAP financial measure, as operating income (loss) before 1) depreciation, amortization and impairments of property and equipment and intangible assets, 2) share-based compensation expense or benefit, 3) restructuring charges or credits and 4) gains or losses on sales or dispositions of businesses.  Because it is based upon operating income (loss), AOCF also excludes interest expense (including cash interest expense) and other non-operating income and expense items. We believe that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the various operating units of our business without regard to either the distortive effects of fluctuating stock prices or the settlement of an obligation that is not expected to be made in cash.

We believe AOCF is an appropriate measure for evaluating the operating performance of our business segments and the Company on a consolidated basis. AOCF and similar measures with similar titles are common performance measures used by investors and analysts to analyze our performance. Internally, we use revenues and AOCF measures as the most important indicators of our business performance, and evaluate management's effectiveness with specific reference to these indicators. AOCF should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with U.S. generally accepted accounting principles ("GAAP"). Since AOCF is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. For a reconciliation of AOCF to operating income (loss), please see page 4 of this release.

This press release may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties, and that actual results, developments and events may differ materially from those in the forward-looking statements as a result of various factors, including financial community and rating agency perceptions of the Company and its business, operations, financial condition and the industry in which it operates and the factors described in the Company's filings with the Securities and Exchange Commission, including the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein. The Company disclaims any obligation to update any forward-looking statements contained herein.

Contacts:

  Kimberly Kerns
Senior Vice President
Communications
The Madison Square
Garden Company
(212) 465-6442
          Ari Danes, CFA
Senior Vice President
Investor Relations
The Madison Square
Garden Company
(212) 465-6072
 

Conference Call Information:
The conference call will be Webcast live today at 10:00 a.m. ET at www.themadisonsquaregardencompany.com
Conference call dial-in number is 877-347-9170 / Conference ID Number 55123416
Conference call replay number is 855-859-2056 / Conference ID Number 55123416 until August 26, 2016

 
THE MADISON SQUARE GARDEN COMPANY
 
CONSOLIDATED/COMBINED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
  Three Months Ended Twelve Months Ended
  June 30, June 30,
  2016 2015 2016 2015
Revenues $217,764  $254,965  $1,115,311  $1,071,551 
Direct operating expenses 141,757  156,877  737,857  724,881 
Selling, general and administrative expenses 96,621  70,130  333,603  238,318 
Depreciation and amortization 25,543  23,639  102,482  108,758 
Operating income (loss) (46,157) 4,319  (58,631) (406)
Other income (expense):        
Loss in equity method investments (14,130) (5,541) (19,099) (40,590)
Interest income 2,412  840  6,782  3,056 
Interest expense (485) (617) (2,028)  (2,498)
Miscellaneous income (expense) 63  (1) (4,017) 190 
Loss from operations before income taxes (58,297) (1,000) (76,993) (40,248)
Income tax expense (122) (119) (297) (436)
Net loss $(58,419) $(1,119) $(77,290) $(40,684)
Basic loss per common share $(2.39) $(0.04) $(3.12) $(1.63)
Diluted loss per common share $(2.39) $(0.04) $(3.12) $ (1.63)
Basic weighted-average number of common shares outstanding 24,479  24,928  24,754  24,928 
Diluted weighted-average number of common shares outstanding 24,479  24,928  24,754  24,928 

ADJUSTMENTS TO RECONCILE ADJUSTED OPERATING CASH FLOW TO
OPERATING INCOME (LOSS)

The following is a description of the adjustments to operating income (loss) in arriving at adjusted operating cash flow as described in this earnings release:

  • Share-based compensation expense. This adjustment eliminates the compensation expense relating to restricted stock units granted under our employee stock plans and non-employee director plans in all periods.
  • Depreciation and amortization. This adjustment eliminates depreciation, amortization and impairments of property and equipment and intangible assets in all periods.
     
  Three Months Ended Twelve Months Ended
  June 30, June 30,
  2016 2015 2016 2015
Operating income (loss) $(46,157) $4,319  $(58,631) $(406)
Share-based compensation 6,829  2,434  24,476  10,306 
Depreciation and amortization 25,543  23,639  102,482  108,758 
Adjusted operating cash flow $(13,785)  $30,392  $68,327  $118,658 


 
THE MADISON SQUARE GARDEN COMPANY
 
CONSOLIDATED/COMBINED OPERATIONS DATA
(Dollars in thousands)
(Unaudited)
 
REVENUES
 
  Three Months Ended   
  June 30,  
  2016 2015 % Change
MSG Entertainment $84,042  $93,235  (10)%
MSG Sports 133,506  161,552  (17)%
All other  216  178  NM 
Total Madison Square Garden Company $217,764  $254,965  (15)%


  Twelve Months Ended  
  June 30,  
  2016 2015 % Change
MSG Entertainment $415,390  $414,161  %
MSG Sports 699,062  656,683  6%
All other 859  707  NM 
Total Madison Square Garden Company $1,115,311  $1,071,551  4%


OPERATING INCOME (LOSS) AND ADJUSTED OPERATING CASH FLOW
 
  Operating Income (Loss) Adjusted Operating Cash Flow
  Three Months Ended   Three Months Ended  
  June 30,   June 30,  
  2016 2015 % Change 2016 2015 % Change
MSG Entertainment $(17,863) $(8,411) (112 )% $(13,176) $(4,580) (188)%
MSG Sports 12,750  40,357  (68)% 18,369  41,870  (56)%
All other (41,044) (27,627) (49)% (18,978) (6,898) (175)%
Total Madison Square Garden Company $(46,157) $4,319  NM  $(13,785) $30,392  NM  


  Operating Income (Loss) Adjusted Operating Cash Flow
  Twelve Months Ended   Twelve Months Ended  
  June 30,    June 30,  
  2016 2015 % Change 2016 2015 % Change
MSG Entertainment $(32,335) $27,252  NM  $(14,581) $41,189  NM 
MSG Sports 109,754  75,316  46% 131,027  98,006  34%
All other (136,050) (102,974) (32)% (48,119) (20,537) (134)%
Total Madison Square Garden Company $(58,631) $(406) NM  $68,327  $118,658  (42)%


 
THE MADISON SQUARE GARDEN COMPANY
 
CONSOLIDATED AND COMBINED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
 
  June 30,
 2016
 June 30,
 2015
ASSETS    
Current Assets:    
Cash and cash equivalents $1,444,317  $14,211 
Restricted cash 27,091  12,590 
Accounts receivable, net 75,998  51,734 
Net related party receivables, current 4,079  327 
Prepaid expenses 27,031  23,879 
Loan receivable from MSG Networks   30,836 
Other current assets 25,337  35,058 
Total current assets 1,603,853  168,635 
Net related party receivables, noncurrent 1,710   
Investments and loans to nonconsolidated affiliates 263,546  249,394 
Property and equipment, net 1,160,609  1,188,693 
Amortizable intangible assets, net 15,729  22,324 
Indefinite-lived intangible assets 166,850  166,850 
Goodwill 277,166  277,166 
Other assets 54,487  75,880 
Total assets  $3,543,950  $2,148,942 
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current Liabilities:    
Accounts payable $13,935  $3,307  
Net related party payables 15,275  1,588 
Accrued liabilities:    
Employee related costs  119,357  95,997 
Other accrued liabilities 133,832  121,509 
Deferred revenue 332,416  311,317 
Total current liabilities 614,815  533,718 
Defined benefit and other postretirement obligations 66,035  80,900 
Other employee related costs 32,921  53,337 
Deferred tax liabilities, net 194,583  206,944 
Other liabilities 49,175  50,768 
Total liabilities 957,529  925,667 
Commitments and contingencies    
Stockholders' Equity:    
Class A Common stock, par value $0.01, 120,000 shares authorized; 19,777 shares outstanding as of June 30, 2016 204   
Class B Common stock, par value $0.01, 30,000 shares authorized; 4,530 shares outstanding as of June 30, 2016 45   
Preferred stock, par value $0.01, 15,000 shares authorized; none outstanding as of June 30, 2016    
Additional paid-in capital 2,806,352   
Treasury stock, at cost, 671 shares as of June 30, 2016 (101,882)  
Accumulated deficit (75,687)  
MSG Networks' investment   1,263,490 
Accumulated other comprehensive loss (42,611) (40,215)
Total stockholders' equity 2,586,421   1,223,275 
Total liabilities and stockholders' equity $3,543,950  $2,148,942 


 
THE MADISON SQUARE GARDEN COMPANY
 
SELECTED CASH FLOW INFORMATION
(Dollars in thousands)
(Unaudited)
 
  Twelve Months Ended
  June 30,
  2016 2015
Net cash provided by operating activities $125,785  $69,352 
Net cash used in investing activities (115,690) (102,656)
Net cash provided by financing activities 1,420,011  41,372 
Net increase in cash and cash equivalents 1,430,106  8,068 
Cash and cash equivalents at beginning of period 14,211  6,143 
Cash and cash equivalents at end of period $1,444,317  $14,211 
 

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